What Employers Should Know About Salary History Bans

Until recently, employers in all states could ask applicants about their current salaries or what they made at previous jobs. However, with a renewed national focus on gender inequality in pay, many states are considering salary history bans that prohibit this practice. So far, only a handful of states and cities have passed such laws. However, employers should be aware that more laws could be on the horizon and be mindful of equal pay laws when negotiating an applicant’s salary.

Can Employers Ask Job Applicants for Salary Information?

In recent years, several states and cities have considered making it illegal for employers to ask job applicants about their current or previous salaries. To date, four states and a handful of cities have passed this type of law, including: Massachusetts, Delaware, Oregon, California, New York City, and San Francisco. However, in the rest of the nation, employers are still free to ask job applicants about their current or prior salaries. (To learn more about California’s salary history ban, see our article on California equal pay laws.

What’s the Reasoning Behind Salary History Bans?

Salary history bans are designed to address gender pay inequality. Although it has long been illegal for employers to pay men and women different wages for the same work, a significant pay gap still exists. According to a report from the Bureau of Labor Statistics, women earned 82% of what men earned in 2016. For minority women, the pay gap is generally even more pronounced.

When employers continue to base salaries on an applicant’s past earnings, it can be impossible for women to break free of the cycle of discriminatory pay practices. Low pay can continue to follow them from job to job over the course of their careers. The salary history ban is designed to put a stop to that.

What Does a Salary History Ban Prohibit?

Salary history bans are relatively straightforward. They prohibit employers from asking applicants about their current or past salaries or benefits. They generally also prohibit employers from seeking this information through an agent or from sources other than the applicant, such as the applicant’s former employers. In some states, employers are allowed to seek salary history information only after making a conditional offer of employment with a specified salary.

Employers in states with salary history bans can still ask applicants about their salary requirements or expectations for the job. So employers will still be able to identify and quickly weed out applicants with unrealistic expectations or whom they can’t afford to hire. And, if an applicant offers up salary information voluntarily without being asked, the employer can consider that information in setting pay.

Are There Other Considerations When Negotiating an Applicant’s Salary?

Although it’s still legal to ask about salary history in most states, there are a few other things to consider. First, salary ban legislation will likely continue to be introduced in the upcoming years. The National Women’s Law Center reports that almost half of the states considered salary history bans in 2017.

Second, employers in all states are still prohibited from paying men and women different wages for the same work under the federal Equal Pay Act. (See our article on federal workplace antidiscrimination laws to learn more.) Unless there is some legitimate business reason for the disparity in wages—such as seniority, experience, or the quality or quantity of the employee’s work—your company could be opening itself up to an equal pay lawsuit. According to EEOC guidelines and some courts, an applicant’s salary alone isn’t sufficient by itself to justify a pay disparity between men and women. (Courts disagree on this issue, so it’s best to consult with a local employment lawyer if you base pay on prior salary alone.)

Third, pay disparities can lead to poor morale and low employee retention. Employees are bound to talk amongst themselves, and many will eventually learn that they are being paid significantly less than a coworker doing the same job. It’s illegal to prohibit employees from discussing their wages, so there’s no way to prevent this from happening. Employees who feel undervalued aren’t likely to do their best work or stick around for the long-haul.

The safest course of action is often to establish a salary range for each position and set pay within those boundaries, based on the applicant’s skills and qualifications.